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Ask McEnearney: How did the real estate market finish the summer months?

This week’s Q&A column is written by David Howell, Executive Vice President and Chief Information Officer, of McEnearney Associates Realtors®, the leading real estate firm in Alexandria. To learn more about this article and relevant market news, contact David at 703-855-5089 or email [email protected]. You may also submit your questions to McEnearney Associates via email for response in future columns.

Question: How did the real estate market finish the summer?

Answer: Every month on our website we profile the most important market indicators for Northern Virginia — contract activity, interest rates, inventory, affordability, and the direction of the market — in an easy to read and digest summary followed by supporting charts and data. In October, we will breakout data in more detail for the third quarter for the City of Alexandria and South Alexandria. In the meantime, we are presenting our latest Market-in-a-Minute summary for Northern Virginia. Read the full StatPak report here.

Contracts

Throughout Northern Virginia, contract activity in August 2023 was down 17.3% from August 2022 and was down for five price categories. Through the first eight months of the year, contract activity is down 22.6%. The average number of days on the market for homes receiving contracts was 21 days in August 2022, down significantly from 35 days last August.

Urgency Index

The Urgency Index, simply the percentage of homes going under contract that were on the market 30 days or less, was up in August compared to last August. During the past 19 years, the Index has been as high as 94.4% (April 2004) and as low as 22.9% (November 2006). In August 2023, the Urgency Index was 80.8%, up from 66.5% in August 2022.

Inventory

The number of homes on the market at the end of August (1,271) was down 40.4% compared to the end of August 2022 and was down for five out of six price categories. The number of new listings coming on the market decreased 11.5% compared to August 2022. The decrease in contract activity was offset by a bigger decrease in inventory, lowering overall supply to 1.0 month from 1.4 months the end of August 2022. To provide some context, during the “Great Recession” in August 2007, supply was 7 months, the average days on market was 84, and there were 9,000 homes on the market.

Interest Rates

30-year fixed mortgage interest rates at the end of August stood at 7.18% up from 6.9 months sat the end of July. The good news is that rates have come down a bit over the last couple of weeks, but the tough news is that they are still near a 22-year high.

Affordability

The payment on a no-money-down, 30-year fixed mortgage for a median-priced home is 99% higher than it was a decade ago in August 2013, and the median price is up 49%. The payment is also 30% higher than last August because of higher interest rates and higher prices. The mortgage payment for a median priced home ($4,742) was much higher in August than the median rented price ($3,000).

Direction Of The Market

Despite a significant contraction in buyer activity, it is still a seller’s market in Northern Virginia. Most of the key indicators remain positive for sellers — absorption rates, the average home price, and the urgency index are higher than this time last year, and perhaps most importantly, the supply of homes is lower. For all the reasons it’s a good time to be a seller, it’s tough on buyers who are dealing with a one-two-three punch of higher prices, higher mortgage interest rates, and very few choices of homes on the market.

Yet we sound a cautionary note for sellers. Buyers are still seeking value among the scarce inventory, and we have seen sellers fall into two broad categories: the “haves” and the “have nots.” The “haves” are those sellers who have priced their homes correctly, and they are reaping the rewards. 70% of the homes that settled in August sold at or above their original list price (almost 4% above) and sold quickly. And there are two distinct categories of “have not” sellers. The first are those who came on the market at a price that was too high, but nonetheless persevered and ultimately sold. They paid a big price in time and money. They typically took four times as long to sell, and at an average of more than 6% under list price.

The other category of “have not” sellers is those whose homes are still on the market unsold. There are over 1,300 homes on the market in Northern Virginia, and they have been on for an average of 60 days. Price matters a lot.

Note: Data derived from BrightMLS and is deemed reliable, but not guaranteed. “Northern Virginia” is defined as Arlington and Fairfax counties and the cities of Alexandria, Falls Church and Fairfax.

If you would like a question answered in our weekly column or to set up an appointment with one of our Associates, please email: [email protected] or call 703-549-9292.

McEnearney Associates Realtors®, 109 S. Pitt Street, Alexandria, VA 22314. www.McEnearney.com Equal Housing Opportunity. #WeAreAlexandria